India showing lagged effects of anti-inflation policies: Fitch
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India showing lagged effects of anti-inflation policies: Fitch

Last Updated: Thursday, June 28, 2012, 21:34
 
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India showing lagged effects of anti-inflation policies: Fitch
New Delhi: Global rating agency Fitch on Thursday said India, China and Korea -- three biggest emerging Asian economies -- are showing lagged effects of tight monetary policies embraced in 2010-11 to fight inflation.

Fitch also pointed out that slow improvement in financial position of countries including India and China has come in the way of positive credit rating momentum in emerging Asia.

Stressing that there are also home-grown sources of weakness, Fitch in a statement said that China, India and Korea are showing the lagged effects of counter inflationary policy tightening in 2010-2011.

Fitch's latest observation comes less than two weeks after it downgraded India's credit outlook to negative citing corruption and lack of reforms.

India's wholesale inflation was 7.55 percent in May. At the retail level, the Consumer Price Index (CPI) inflation for May was 10.36 percent.

Between March 2010 and October 2011, RBI had cut repo rates a record 13 times to tackle against inflation.

In its mid-quarter monetary policy review on June 18, RBI had said, "Reduction in the policy interest rate at this juncture, rather than supporting growth, could exacerbate inflationary pressure."

India's economic growth of India fell to nine-year low of 5.3 percent for the three months ended March 2012, while the overall growth for 2011-12 stood at 6.5 percent.

Fitch had cut GDP growth forecast to 6.5 percent in 2012-13, down from a previous projection of 7.5 percent.

Meanwhile, Fitch today said that positive rating momentum in emerging Asia has stalled amid slower improvement in sovereign balance sheets and for some countries, concerns over high and rising leverage in the private sector.

The entity has a negative outlook on China but it is positive for Korea.

PTI



First Published: Thursday, June 28, 2012, 21:34


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